Genworth Financial Inc. (GNW) posted fourth-quarter operating net loss of 84 cents per share, widely missing the Zacks Consensus Estimate of 9 cents earnings per share. Results also compared unfavorably with 38 cents per share earned in the year-ago quarter.
Including net investment gains of $4 million, goodwill impairment of $274 million and tax impact from potential business portfolio changes of $66 million, net loss of $1.53 per share was incurred against 41 cents earned in the year-ago quarter.
Genworth’s results suffered due to substantial loss at its long-term care (LTC) business.
Operational Performance
Total revenue of Genworth inched up 0.5% year over year to $2.4 billion. The uptick was backed by higher premiums (up 5.8%). Revenues were in line with the Zacks Consensus Estimate.
Total benefits and expenses increased about 60% year over year to $3.3 billion due to higher benefits and other changes in policy reserves and goodwill impairment recorded in the quarter.
Full-Year 2014 Review
The company digested operating net loss of 77 cents against earnings of $1.24 per share in 2013. Genworth also witnessed net loss of $2.51 per share versus net profit of $1.12 per share in 2013.
Revenues of $9.6 billion improved 1.7% year over year.
Segment-wise Quarterly Review
U.S. Life Insurance: The segment reported net operating loss of $482 million against $119 million profit in the year-ago quarter. Huge loss incurred in long-term care insurance and soft-performing fixed annuities business were responsible for the debacle.
Loss at long-term care insurance reflected the completion of the annual review of its LTC active life margins, resulting in after-tax charges of $478 million on its acquired blocks.
Global Mortgage Insurance: The segment’s net operating income of $83 million decreased 22% year over year. Though profits at U.S. Mortgage Insurance improved, lower profit at International Mortgage Insurance resulted in overall decline.
Corporate and Run-Off: Net operating loss was $17 million, narrower than $33 million loss incurred in the year-ago quarter.
Financial Update
Genworth exited 2014 with cash, cash equivalents and invested assets of $78.8 billion, up 7.3% from 2013 end.
Long-term borrowings of Genworth totaled $4.6 billion as of Dec 31, 2014, down about 10% from $5.2 million at 2013 end.
Business Updates
Genworth is undertaking a restructuring plan, which is expected to generate a pre-tax cash savings of over $100 million in the next couple of years.
Genworth is consolidating its U.S. Life Insurance Division and corporate holding company functions, which is resulting in headcount reduction.
In connection with the divestiture of the lifestyle protection insurance business, Genworth completed an internal debt restructuring, thus recognizing $108 million in tax benefits in the reported quarter.
Performance of Other Life Insurers
While earnings at Reinsurance Group of America Inc. (RGA) and StanCorp Financial Group Inc. (SFG) surpassed their respective Zacks Consensus Estimate, Torchmark Corp. (TMK) reported in line with the same in the fourth quarter.
Zacks Rank
Genworth presently carries a Zacks Rank #5 (Strong Sell).
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